When it comes to funding a startup, it’s important to know the basic statistics. The majority of these enterprises get funded from the entrepreneur’s personal money, while about 38 percent of these enterprises get funded by one’s friends and family. The rest of the money comes from various types of investors (venture capitalists and angel investors) or from loans (both business and personal). Either way, securing funding for your first startup is not an easy task, so, here are five tips to help you out with this particular task.
Have a business plan
The first thing you need is a business plan. Regardless if you want to pitch your idea to a venture capitalist, an angel investor or a rich uncle, you need to have a business plan on your hands. This is a basic statement of your business idea, your plan of execution and your keys to success. Even if you’re 100 percent confident that you can verbally express all of this, it’s pivotal that you have this in writing and in the form of a business plan. This way, you get one more way of validating your idea and one more way of appearing much more professional.
Make a killer presentation
One of the most important things you need to learn is how to make a killer presentation. This will help you with both investor meetings and crowdfunding. After all, so many potentially great startups failed to launch because the arguments of teams behind them were… well, unconvincing, at the very least. On the other hand, there was this one guy on Kickstarter, who managed to gather more than $55,000 in order to make a potato salad. How? Well, because his idea was fresh, witty and the delivery was just right. There’s a lot that potential entrepreneurs can learn from this viral internet phenomenon.
Consider your current situation
The next thing you need to do is make an assessment of your current situation and make a decision of what options you have in front of you. Chances are that you will apply for a loan and if so, you need to be aware of the fact that there are two major loan types – secured and unsecured. Secured loans require you to have an asset to offer as collateral. On the other hand, you have numerous online platforms offering unsecured business loans for those who need money quickly in order to act.
Improve your credit score
Sometimes, especially when applying for an unsecured loan, you need to pass a certain credit score check. This is a score that you get awarded based on factors such as your financial history, the amount of money that you currently owe, your vigilance in paying your monthly credit payments in time and more. The most commonly used grading system is the so-called FICO score which ranges between 300 and 850. The higher the number, the better the score and the better the terms you can hope for.
Find a partner
The last piece of advice you need to hear is the suggestion that you should definitely find yourself a partner. First of all, a partnership is a lot more reliable structure for a startup than a sole proprietorship. Why? Well, because it helps split liability between two parties rather than having you face all the consequences on your own. Second, it’s not just about the money. A partner is also someone who helps you with various administrative tasks. This alone can make a difference between success and failure.
One of the things that you need to be aware of when gathering funds is the fact that it’s a major obligation that doesn’t end when you receive the money. By taking money from a certain party, you’re either agreeing to pay them back (with interest) or selling them equity in your company, thus giving them a degree of control over your enterprise. So, choose wisely and think about the long-term consequences of what you’re signing at the moment.